A Defense Company Surmounts Industry Challenges with Cost Management
Spurred by labor shortages, reduced budgets, and deadline pressures, DefenseCo transformed its operating model.
DefenseCo* needed to drastically reduce production costs to remain competitive and fuel long-term growth but faced many roadblocks. Widely varying programs at different life cycle stages made managing costs overwhelming, and a significant talent shortage threatened DefenseCo’s future.
Numerous past attempts to reduce costs had failed, leading to low morale and a pervasive lack of urgency. It became clear that DefenseCo needed a fresh start. Together, we determined the best course of action: a zero-based redesign focusing on cost transformation. This clean-sheet approach would reimagine the company’s operating model and processes from the ground up to maximize efficiency, with the goals of increasing both growth and margins.
Collaborating closely with DefenseCo, we used high-level diagnostics to define the organization’s objectives and design pilot programs, beginning with one business function and one business site. The company’s CFO supported our transformation approach and recommended the finance program for the business function pilot. We worked across finance, from accounting to program management, which included activities such as cost estimating and contract management. The business unit pilot was initiated at one of DefenseCo’s production plants, where we conducted an end-to-end look across capabilities such as engineering, production, operations, and other support functions.
Following the success of the pilots, we deployed client-led, Bain-supported teams to scale the zero-based transformation program across the organization. Standard zero-based redesign programs focus primarily on selling, general, and administrative business functions. But our approach was comprehensive, and included engineering, manufacturing, and aftermarket support, among others. Over the course of 24 months, the teams focused on four key priorities: reduce low-value tasks, standardize processes, automate tasks, and reassign responsibilities.
Agile client teams helped develop and execute hundreds of bottom-up initiatives across programs, functions, and business units. Our Results Delivery® Office, a specialized team that assists with large-scale transformations, ensured that each initiative was prioritized and rigorously tracked to guarantee it delivered value. The persistent talent shortage, particularly in engineering, was also a contributing factor that forced DefenseCo to be judicious in deciding which programs were high priority and how to allocate resources.
Relationship building within the organization—from the CFO to individual contributors—was critical to the transformation’s success. As we spent time listening to the DefenseCo team, we gained insight into the unique nuances of the business and collaborated to create custom, cost-saving solutions to boost DefenseCo’s progress long after the engagement concluded.
As a result of our work with DefenseCo, the company identified 20% in cost savings over two years. We codeveloped tailored and repeatable blueprints for a smooth deployment of the cost program across the organization. The program paid for itself fully within a year and returned more than 15 times our fees.